2009 Annual Report and Financial Statements - UBA Plc

Risk management report (continued)
RISK MITIGATION
Controls
Controls/mitigants are identifi ed and documented for existing and new products, processes and systems to ensure that inherent risks are
appropriately mitigated.
The adequacy of these mitigants are tested on periodic basis through administration of control self assessment questionnaires using OpRisk
Manager – an operational risk management tool – to risk owners to confi rm the eff ectiveness of established controls.
Limit concentrations
The Group applies a comprehensive concentration risk management framework that sets exposure limits as a function of capital across all
dimensions – country, sector, single obligor, product, etc. of its asset portfolio.
Risk appetite management
Risk appetite limits are continuously reviewed and reduced when assessed risk exceeds risk tolerance levels.
Hedging
Hedging transactions are used to mitigate commodity and currency risk, where liquid markets for hedging instruments exist.
DEBT RESTRUCTURING
Depending on the severity of classifi cation, the Bank’s remedial corrective action is geared towards enhancing the performance of weak credits.
Early attention, including substantive discussions with borrowers, is required to correct defi ciencies. Our approach towards achieving this goal
will always involve extensive dialogue between the relationship offi cer, remedial offi cers, recovery offi cers and legal counsel. Whilst the primary
responsibility for renegotiating/restructuring the contract terms lies with the relationship manager, it is the remedial and recovery offi cers that
have the responsibility for repair and/or recovery strategy.
Under certain conditions it may be decided as part of an overall portfolio strategy to consider restructuring of a sub-portfolio/product group
in mitigation of the overall potential loss.
REMEDIAL MANAGEMENT PROCESS
The remedial management process is defi ned as a fl ow of planned, recognisable and sequential events involved in the nurturing and
management of past due obligations to performing obligations or to full recovery.
This process covers the evaluation, analysis and approval of credit facilities for existing past due obligations. Remedial process includes new
extensions of credit, incremental risk, restructuring and/or annual review of previously approved facilities summarised as follows:
Rate/Payment modifi cation or longer-term payment relief: Adjusting interest rates or payment frequency
Ageing/Extension: Modifying the length of the loan
Cash Out: Refi nancing a loan at a higher principal amount in order to secure additional funds for other uses
Loan and Collateral Consolidation: Combining several loans into a single payment which is lower than if the payments were separate
Short Sale – Loan is discounted to prevent imminent foreclosure
Deed in lieu – Voluntary conveyance of interest in property to the Bank
The process involves full information gathering, together with fi nancial and risk analysis leading up to the approval decision. Analysis and
standards vary according to business product, market, transaction characteristics and environmental issues, and good judgement is always
applied in ensuring that all relevant issues have been addressed in each situation.
RECOVERY MANAGEMENT
The Group Recovery Division (GRD) manages the repayment of all past due obligations that are classifi ed as either substandard, doubtful or loss
as well as intervenes with those accounts that appear on Watchlist that may be past due however not yet impaired. Any accounts remaining on
the Bank’s memorandum database are also managed for potential write-off recoveries.
Annual Report 2009 93
Financials